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Procurement policy already a success for SMMEs, says minister

Lindiwe Zulu says the policy for government departments to procure at least 30% of their goods and services from SMMEs has seen nearly half achieve that this year

12 December 2017 - 12:53
Linda Ensor

Lindiwe Zulu. Picture: GCIS

The procurement policy to support small-, micro-and medium-sized enterprises (SMMEs) under the amended procurement regulations has already achieved successes, Small Business Development Minister Lindiwe Zulu said on Tuesday.

The policy was introduced in amendments to the regulations under the Preferential Procurement Policy Framework Act and requires that government departments and entities procure a minimum of 30% of their goods and services from SMMEs.

"Already, between April 1 and November 30 2017, 81 out of 184 national and provincial departments procured between 60% to 100% of their goods and services from SMMEs, and only 22 departments (both national and provincial) have not yet reached the 30% target," said Zulu, speaking at a media briefing on the work of her department. She cautioned that it would take time to implement the regulations as processes had to be followed.

Director-general Edith Vries said estimates were that just more than R70bn had been spent by national and provincial departments between April and November this year. Total government procurement this year would be about R700bn.

Zulu said the current economic climate of sluggish growth was particularly harsh for small businesses that were heavily reliant on cash purchases for their survival. "These conditions have led to the demise of some small businesses in the large, informal business sector in particular," she said.

Providing a profile of the small business sector, Zulu said data suggested there were about 2.175-million privately owned businesses in SA, 2.15-million of which were small-and medium-sized enterprises (SMEs). Of these 1.5-million were not registered for VAT or corporate income tax and could, therefore, be classified as informal. About 150,000 were medium-sized businesses; 450,000 were small businesses; and 1.3-million were micro-enterprises.

Zulu said the contribution of SMEs to GDP was currently estimated to be between 42% and 47%, but could be increased significantly. "It is possible for the contribution of small businesses to the GDP to increase to between 60% and 80% and to account for 90% of the 11-million new jobs envisaged by the national development plan by 2030," Zulu said.

De Vries emphasised that the failure rate of small businesses in SA was no different to that in the rest of the world. It was important for the business idea to have a reasonable prospect for success — and a market was also needed for the envisaged product.

According to Small Enterprise Finance Agency CEO Thakhani Makhuvha, most small businesses did not reach their second year if they did not receive nurturing and mentorship support.

Small Enterprise Development Agency CEO Mandisa Tshikwatamba said that, very often, businesses that failed often re-emerged in a different form later, having learnt from their mistakes.